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The members of OECD’s Development Assistance Committee (DAC) give almost

USD 70 billion in foreign aid (development co-operation) annually. How to manage that aid for the best results is the subject of this study, based on the organisational structures and practices of 22 of the world’s main donor countries. More attention than ever is being given to how to make aid effective, and an increasing number of countries are becoming donors.

For both these reasons, it is of particular importance to have up-to-date information on how donors with many years experience are managing their aid programmes, and to make good practice available in a readily accessible form.

Managing Aid: Practices of DAC Member Countries is drawn directly from the experience of DAC members, and covers issues such as legal frameworks for development co-operation, how donors organise their operations in partner developing countries, centralised versus decentralised management, relations with non-governmental organisations, and managing gender equality, environmental sustainability and humanitarian action. It illustrates how aid agencies are being reorganised and reconfigured to improve their capacity to help meet the Millennium Development Goals and improve the standard of living and quality of life of half the population of the planet

This study will be of interest to managers in aid agencies, to teachers and students of development co-operation theory and practice and to staff of multilateral and international organisations, civil society organisations and the private sector seeking to understand how aid agencies work.

DAC Guidelines and Reference Series

Managing Aid



MANAGING AID Practices of DAC Member Countries


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« DAC Guidelines

and Reference Series

Managing Aid

ISBN 92-64-00761-X

DAC Guidelines and Reference Series





Managing Aid:

Practices of DAC

Member Countries



The OECD is a unique forum where the governments of 30 democracies work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies.

The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The Commission of the European Communities takes part in the work of the OECD.

OECD Publishing disseminates widely the results of the Organisation’s statistics gathering and research on economic, social and environmental issues, as well as the conventions, guidelines and standards agreed by its members.

Also available in French under the title:

La gestion de l'aide : pratiques des pays membres du CAD

© OECD 2005

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he 23 members of OECD’s Development Assistance Committee (DAC) disbursed in 2003 nearly USD 70 billion of public money, provided by taxpayers for the purposes of development. How do they plan, manage and assess the impact of these funds?

This study, based on a survey of DAC member countries’ structures, systems and practices, is intended to help answer this question. I believe that it is an important and timely publication, and it offers a wealth of observations and analysis built up over years of research.

Since the DAC was established in 1960 it has served as a forum for the exchange of ideas and identification of best practices for managing development co-operation. All the DAC member countries are committed to maximising the effectiveness of their development co-operation, but different government systems and legislative and accountability frameworks are reflected in varying approaches to implementing aid programmes. This study sets out to provide aid managers, analysts, students and all other interested parties with perspectives on the diversity of solutions developed with the objective of enhancing the aggregate flows, timeliness and effectiveness of development co-operation efforts of the major donor countries.

Richard Manning DAC Chairman




This reference document stemmed from requests by DAC member countries and other participants and observers of the global development assistance system and follows from the 1999 study “A Comparison of Management Systems for Development Cooperation in OECD/DAC members”. The publication was researched and written by Michael Laird supported by Jean Lennock and Julia Schweizer, with the assistance of Michelle Weston and Carola Miras. Numerous people in the OECD’s Development Co-operation Directorate provided inputs and comments as the publication was being prepared. The work benefited from grants made by Austria, Canada, Germany, Ireland and Japan.

In order to achieve its aims the OECD has set up a number of specialised committees. One of these is the Development Assistance Committee, whose members have agreed to secure an expansion of aggregate volume of resources made available to developing countries and to improve their effectiveness. To this end, members periodically review together both the amount and the nature of their contributions to aid programmes, bilateral and multilateral, and consult each other on all other relevant aspects of their development assistance policies.

The members of the Development Assistance Committee are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, the United States and the Commission of the European Communities.


Table of Contents

Acronyms . . . 9

Introduction . . . 11

Chapter 1. Managing Development Co-operation in the New Millennium: The Context, Challenges and Way Forward. . . 13

The need to respond decisively to today’s development challenges. . . 14

Charting the way forward . . . 15

Policy coherence for development . . . 19

Notes . . . 21

Chapter 2. The Legal and Political Foundations for Development Co-operation . . 23

Legislative basis. . . 24

Political context . . . 24

Parliamentary oversight . . . 27

Public support for development co-operation . . . 28

Notes . . . 30

Chapter 3. DAC Member Countries’ Development Co-operation at the Dawn of the 21st Century . . . 31

Aid to developing and transition countries. . . 32

Mechanisms for donor co-ordination . . . 37

Notes . . . 39

Chapter 4. Sources and Allocation of Funds. . . 41

Sources of foreign assistance funds . . . 42

Notes . . . 50

Chapter 5. The Overall Shape of DAC Member Countries’ Development Co-operation Systems. . . 51

The shape of development co-operation systems . . . 52

Specific features of DAC member countries’ development co-operation systems. 52 Foreign assistance provided by sub-national authorities . . . 60

Chapter 6. Managing Development Agencies: Internal Structures and Systems. . 63

Organisational design. . . 64

The increased need for communication and co-ordination within development agencies . . . 66


Specialised units and technical expertise . . . 67

Cross-cutting issues . . . 67

Chapter 7. Managing Human Resources for Development Co-operation. . . 71

The human resource “system” . . . 72

Planning human resources . . . 72

Human resources at the field level. . . 77

Chapter 8. Implementing Bilateral Programmes in Different Partner Country Contexts. . . 81

Implementing development partnerships . . . 82

Supporting development in difficult partnerships . . . 88

Notes . . . 90

Chapter 9. Humanitarian Assistance, NGO Co-financing Schemes and Other Forms of Bilateral Assistance. . . 91

Regional programmes. . . 92

Centrally-managed programmes . . . 93

Humanitarian action . . . 95

Co-financing of NGOs and other civil society organisations . . . 98

Chapter 10. Multilateral Assistance and Contributions to Global Funds . . . 101

Multilateral assistance . . . 102

Global funds. . . 106

Notes . . . 108

Chapter 11. Checks and Balances in Development Co-operation Systems . . . 109

Monitoring . . . 110

Evaluation . . . 111

Managing for development results. . . 114

Involvement of national audit offices . . . 116

Advisory bodies . . . 117

Notes . . . 119

Annex A.1. Basic Profiles of DAC Member Countries’ Foreign Assistance Programmes . . 121

Annex A.2. Report on the Management of Development Co-operation Programmes in Mozambique . . . 145

Annex A.3. An Introduction to DAC Statistics . . . 157

Annex A.4. Mainstreaming Poverty Reduction and Other Cross-cutting Issues: HIV/AIDS, Gender and Environment. . . 161

Annex A.5. Managing Development Projects and Programmes . . . 171

Bibliography. . . 177


List of Boxes

1.1. Shaping the 21st Century: The Contribution of Development Co-operation. . . 15

1.2. Principles for country ownership, donor harmonisation and alignment. . . 17

3.1. Non-DAC donors . . . 36

3.2. DAC reference material . . . 38

4.1. OECD Expert Seminar on Aid Effectiveness and Selectivity: Integrating Multiple Objectives into Aid Allocations . . . 48

5.1. Restructuring DAC member countries’ development co-operation systems . . 53

5.2. Involvement of the Ministry of Foreign Affairs in the management of foreign assistance programmes . . . 56

6.1. Key success factors for mainstreaming cross-cutting issues. . . 69

7.1. Best Practice Guidelines for Contracting Out Government Services. . . 76

8.1. Good practice approaches for supporting poverty reduction partnerships . . . . 83

8.2. Good practices for donor-donor relationships . . . 84

8.3. Joint donor work in Mozambique and Zambia. . . 85

8.4. CIDA’s country development framework for Haiti . . . 90

9.1. General principles and good practice for humanitarian assistance . . . 97

10.1. Foreign assistance programmes managed by the European Community . . . 103

11.1. DAC Principles for evaluation of development assistance . . . 112

List of Tables 1.1. Millennium Development Goals . . . 16

4.1. The Homogeneous Budget for International Co-operation (HGIS) . . . 43

10.1. Global funds. . . 107

11.1. DANIDA’s approach to matching feedback vehicles to specific audiences . . . 113

A3.1. DAC List of Aid Recipients – As at 1 January 2004 . . . 160

A5.1. The logical framework structure . . . 173

A5.2. An example of a logical framework – establishing income generating activities for women . . . 174

List of Figures 3.1. Net Official Development Assistance in 2003 – Amounts. . . 33

3.2. DAC member countries’ foreign assistance at a glance . . . 34

6.1. Australian Agency for International Development (AusAID) simplified organisational structure . . . 65

7.1. Programme size and staff numbers in Mozambique. . . 78

7.2. Programme managed in Mozambique per professional staff member . . . 79

11.1. From MDGs to you: DFID strategy and organisation . . . 115

A.2.1. Programme size and staff numbers in Mozambique. . . 150

A.2.2. Programme managed in Mozambique per professional staff member . . . 151

Table of Contents



ACIAR Australian Centre for International Agricultural Research ACP Africa, Caribbean and Pacific

ADA Austrian Development Agency

AECI* Spanish Agency for International Co-operation AfDB African Development Bank

AFD* French Development Agency

APAD Portuguese Development Support Agency APEC Asia Pacific Economic Co-operation AsDB Asian Development Bank

AusAID Australian Agency for International Development

BMZ* Ministry of Economic Co-operation and Development (Germany) BTC Belgian Technical Co-operation

CAP Consolidated Appeals Process CG (World Bank) Consultative Group CHAP Common Humanitarian Action Plan

CICID* Inter Ministerial Committee for International Co-operation and Development (France) CIDA Canadian International Development Agency

CRS Creditor Reporting System

DAC Development Assistance Committee

DCD Development Co-operation Directorate (Ireland) DED* German Development Service

DEG* German Investment and Development Corporation

DFID Department for International Development (United Kingdom)

DGCID* Directorate General for International Co-operation and Development (France) DGCS* Directorate General for Development Co-operation (Italy)

DGDC* Directorate General for Development Co-operation (Belgium)

DGIS* Directorate General for International Co-operation (the Netherlands) EBRD European Bank for Reconstruction and Development

ECHO European Commission Humanitarian Office ECOSOC (United Nations) Economic and Social Council EDF European Development Fund

EIA Environmental Impact Assessment

GAVI Global Alliance for Vaccines and Immunisation GDP Gross domestic product

GEF Global Environment Facility

GFATM Global Fund for AIDS, TB and Malaria GNI Gross national income

GNP Gross national product

GTZ* (German) Agency for Technical Co-operation HIPC Heavily Indebted Poor Country

ICP* Portuguese Co-operation Institute


ICRC International Committee of the Red Cross IDA International Development Association IDB Inter-American Development Bank

IDRC International Development Research Centre (Canada) IFAD International Fund for Agricultural Development IMF International Monetary Fund

IPAD* The Institute for Portuguese Development Support JBIC Japan Bank for International Co-operation

JICA Japan International Co-operation Agency KfW* (German) Bank for Development

MDGs Millennium Development Goals

MOPAN Multi-Organisational Partnerships, Alliances and Networks MTEF Medium-Term Expenditure Framework

NEPAD New Partnership for Africa’s Development NGO Non-governmental organisation

NORAD Norwegian Agency for Development Co-operation NZAID New Zealand Agency for International Development OAG Office of the Auditor General (Canada)

ODA Official development assistance

OECD Organisation for Economic Co-operation and Development PCM Project Cycle Management

PRGF Poverty Reduction Growth Facility PRSP Poverty Reduction Strategy Paper PRS Poverty Reduction Strategy

PSA Public Service Agreement (United Kingdom) SAARC South Asia Association for Regional Co-operation SADC Southern Africa Development Community SDA Service Delivery Agreement (United Kingdom) SDC Swiss Agency for Development and Co-operation SDR Special Drawing Right

SECIPI* State Secretariat for International Co-operation and Latin America (Spain) SECO* State Secretariat for Economic Affairs (Switzerland)

Sida Swedish International Development Co-operation Agency SPA Strategic Partnership with Africa

SWAp Sector Wide Approach

UNAIDS Joint United Nations Programme on HIV/AIDS UNDP United Nations Development Programme

UNECE United Nations Economic Commissioner for Europe UNEP United Nations Environment Programme

UNFPA United Nations Population Fund

UNHCR United Nations High Commissioner for Refugees UNICEF United Nations Children’s Fund

UNIFEM United Nations Development Fund for Women USAID United States Agency for International Development USD United States dollar

WFP World Food Programme WHO World Health Organisation WTO World Trade Organisation

ZSP* Priority Zone for Partnerships (France)

* Denotes acronym in original language.




his report aims to expand knowledge on the various practices and sometimes complex structures adopted by the 22 member countries of the OECD’s Development Assistance Committee (DAC)1 for managing their foreign assistance to developing and transition countries. It highlights relevant work within the DAC as well as good practices or noteworthy features of particular DAC member countries’ programmes. The annexes provide information on DAC member country programmes, DAC statistics, the mainstreaming of cross-cutting issues and the management of development projects and programmes.

This report builds on a similar study published by the OECD in 1999.2

The size and effectiveness of development programmes has been a central pre- occupation of the DAC since its inception 40 years ago. The DAC’s Peer Reviews make an important contribution to assessing the performance of each individual DAC member. This is a critical aspect of broader concerns to improve aid effectiveness which include evaluating the overall impact of aid programmes on partner countries or on certain sectors such as health or education.

Demonstrating and improving performance presents a significant challenge for DAC members. That at least nine DAC member countries underwent major reorganisation of some form in the last ten years highlights members’ efforts to address some of these challenges through organisational reforms. Among the main aid management challenges that DAC member countries face and which are discussed in this report are:

Establishing an appropriate legal and policy framework for the development programme.

Improving public awareness and understanding of development issues.

Maintaining and increasing levels of funding, and increasing the predictability of aid levels.

Allocating development funds appropriately including between multilateral and bilateral channels.

Improving co-ordination with other stakeholders.

Promoting policy coherence.

Managing human resources for development.

Developing an effective organisational structure.

Monitoring, evaluation and independent review of the programme.

Promoting partnership and decentralisation.

An important input for this study has been the information and insights gained as part of the on-going peer reviews of DAC members’ development co-operation policies and programmes. In addition, in order to collect information on aid management issues from a field perspective, a mission was organised to Mozambique, one of the least-developed countries in the world and a country where 19 DAC member countries are actively engaged


and represented at field level. A mission to the Czech Republic was also conducted which provided an opportunity to gain an understanding of the issues faced by a non-DAC donor.


1. The DAC currently has 22 member countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom and the United States. The Commission of the European Communities is also a member of the DAC.

2. OECD (Organisation for Economic Cooperation and Development) (1999), A comparison of management systems for development co-operation in OECD/DAC members, OECD, Paris. Available at:



© OECD 2005

Chapter 1

Managing Development Co-operation in the New Millennium: The Context,

Challenges and Way Forward

There is evidence that countries can lift themselves out of poverty and improve the quality of life of their people. At the same time, promoting development and reducing poverty remain major tasks. The efforts of developing countries themselves can be enhanced with foreign aid. The adoption in 2000 of the Millennium Declaration set out a partnership to support development, building on the DAC’s own 1996 strategy, Shaping the 21st Century: The Contribution of Development Cooperation. Key principles now receiving priority attention relate to partner country ownership, donor harmonisation and alignment with local strategies. Policy coherence for development, between donors’ policies for development co-operation, trade, investment, migration and environment, to name but a few issues, is receiving increasing scrutiny given recognition of the impact these policies can have in a highly integrated world. The DAC has been at the forefront of the discussions of all these issues as member countries continue to work to improve the volume, targeting, effectiveness and efficiency of their aid programmes.


The need to respond decisively to today’s development challenges

Decades of experience have demonstrated that countries can lift themselves out of poverty and help people improve their quality of life. Across many countries, life expectancy and primary school enrolment rates have been increasing and infant mortality rates have been falling. Institutions that support democratic societies and market-based economies have been established or re-inforced. Scientific innovations have helped to raise agricultural production. Senegal, Thailand and Uganda have been notably successful in addressing their HIV/AIDS epidemics. Korea, Singapore and Chinese Taipei, amongst others, have graduated from needing foreign assistance altogether and today implement their own development co-operation programmes.

At the same time, the stark contrasts that characterise the world mean that promoting development and reducing poverty still remains a major and urgent task. Of the six billion people on our planet, the one billion living in developed countries earn four-fifths of all income while life is a struggle to survive on less than USD 1 a day for an estimated one billion people in developing or transition countries. Life expectancy at birth is 80 years or more in Japan, Sweden and Switzerland but less than 40 years in some countries ravaged by conflict or the spread of HIV/AIDS such as Botswana, Malawi, Sierra Leone, Zambia and Zimbabwe. The average maternal mortality ratio is 21 deaths per 100 000 live births in developed countries but rises to over 1 500 deaths in Burundi, Chad, Ethiopia, Rwanda, Sierra Leone and Sudan. Primary school enrolment rates are less than 40% in Angola, Burkina Faso, the Democratic Republic of Congo and Niger. In some countries – including Afghanistan, Cambodia, Chad and Ethiopia – fewer than 1 in 3 people have access to safe water.1

A recent survey commissioned by the World Bank found that overwhelming majorities of opinion leaders in both developed and developing countries believed that global peace and stability will not be achieved unless a major effort is made to reduce poverty around the world.2 Furthermore, demographic projections suggest that the world in 2050 may not be stable and develop sustainably unless decisive action is taken to incorporate developing countries more into an increasingly integrated world economy. According to current projections, the population in developed countries will still be around one billion people in 2050 but there will be a substantial contraction in the number of working-age people.

Meanwhile, the population in developing countries will rise from five billion to nearly 7.7 billion, with a massive expansion in the number of people of working age.3 If unchecked, the disparities between conditions in developed and developing countries could increase pressures further on international migration.

While developing and transition countries4 have primary responsibility for their social and economic development as well as to ensure good governance, their efforts can be significantly enhanced with foreign assistance.5 A robust conclusion of recent research is that aid is indeed effective in promoting economic growth and, by implication, in reducing poverty.6 To respond to the world’s continuing development challenges, the provision of


foreign assistance, accompanied by increasing policy coherence, will consequently remain of central importance for today’s and future generations.

Charting the way forward

DAC members acknowledge a strong moral imperative to respond to the extreme poverty and human suffering that exist in the world, as well as a strong self-interest in fostering increased prosperity, stability and security in developing countries.7 As a concrete expression of this, tax payers in DAC member countries regularly provide well in excess of USD 50 billion each year in grants, concessional loans and technical assistance for both developing and transition countries, more than 95% of estimated total foreign assistance from all governments. In addition, developing and transition countries receive financing from the private sector in industrialised countries, most notably through foreign direct investment or grants from private philanthropic foundations and non-governmental organisations (NGOs).

A common vision has been taking shape over the last decade on how best to provide foreign assistance. There is now a wide measure of agreement that, in countries with a sound macro-economic framework and functioning institutions, aid is most likely to deliver sustainable results if it is provided in support of partner country-owned strategies for development. The foundations for this paradigm were laid out in the DAC’s 1996 report Shaping the 21st Century: The Contribution of Development Co-operation8 (see Box 1.1). This report also helped to usher in an era of greater concern by many DAC members on achieving development results, rather than focussing on inputs and individual activities.

Since 1996, the DAC, the United Nations system and the development community as a whole have been active in giving substance to this vision for development and in making it operational. Work has also been proceeding to determine the types of approaches needed to support development in countries with poor policy and governance environments.

The adoption of the Millennium Declaration9 by 189 nations at the United Nations General Assembly in September 2000 was significant as it refined and gave greater

Box 1.1. Shaping the 21st Century:

The Contribution of Development Co-operation

The DAC’s 1996 report Shaping the 21st Century: The Contribution of Development Co-operation described a framework for providing development co-operation based on four pillars:

1. A shared vision for development, defined by a set of measurable goals of economic well- being, social development and environmental sustainability to be pursued country by country. These goals included, most famously, the target of halving by 2015 the proportion of people living on less than USD 1 a day.

2. A concept of partnership, with basic changes to be given effect through compacts that allocate responsibility, reinforce local ownership, strengthen local capacities and foster participation and self reliance.

3. An emphasis on required qualitative foundations in developing countries, including democratic accountability, the protection of human rights and the rule of law, which are essential for the attainment of the more measurable goals.

4. The need for coherence between aid policies and other policies which impact on developing countries.


credibility to the vision for development sketched out in the Shaping the 21st Century strategy. In this declaration, developing as well as developed countries endorsed a partnership to create an environment which is conducive to development and the elimination of poverty. The declaration included a set of inter-related goals and targets – the Millennium Development Goals (MDGs) (see Table 1.1) – that incorporate and expand on the goals adopted in Shaping the 21st Century strategy.

In recent years, DAC members have been working through the commitment made in the Shaping the 21st Century report “… to change how [they] think and how [they] operate, in a far more co-ordinated effort than [they] have known until now”. A key component of this

Table 1.1. Millennium Development Goals (MDGs)

Goals and Targets from the Millennium Declaration Goal 1: Eradicate extreme poverty and hunger

Target 1: Halve, between 1990 and 2015, the proportion of people whose income is less than one dollar a day.

Target 2: Halve, between 1990 and 2015, the proportion of people who suffer from hunger.

Goal 2: Achieve universal primary education

Target 3: Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling.

Goal 3: Promote gender equality and empower women

Target 4: Eliminate gender disparity in primary and secondary education preferably by 2005 and to all levels of education no later than 2015.

Goal 4: Reduce child mortality

Target 5: Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate.

Goal 5: Improve maternal health

Target 6: Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio.

Goal 6: Combat HIV/AIDS, malaria and other diseases

Target 7: Have halted by 2015 and begun to reverse the spread of HIV/AIDS.

Target 8: Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases.

Goal 7: Ensure environmental sustainability

Target 9: Integrate the principles of sustainable development into country policies and programmes and reverse the loss of environmental resources.

Target 10: Halve, by 2015, the proportion of people without sustainable access to safe drinking water and basic sanitation.

Target 11: By 2020, to have achieved a significant improvement in the lives of at least 100 million slum dwellers.

Goal 8: Develop a global partnership for development

Target 12: Develop further an open, rule-based, predictable, non-discriminatory trading and financial system .

Includes a commitment to good governance, development, and poverty reduction– both nationally and internationally.

Target 13: Address the special needs of the least developed countries.

Includes: tariff and quota free access for least developed countries’ exports; enhanced programme of debt relief for HIPC and cancellation of official bilateral debt; and more generous ODA for countries committed to poverty reduction.

Target 14: Address the special needs of landlocked countries and small island developing States.

(through the Programme of Action for the Sustainable Development of Small Island Developing States and the outcome of the twenty-second special session of the General Assembly).

Target 15: Deal comprehensively with the debt problems of developing countries through national and international measures in order to make debt sustainable in the long-term.

Target 16: In co-operation with developing countries, develop and implement strategies for decent and productive work for youth.

Target 17: In co-operation with pharmaceutical companies, provide access to affordable, essential drugs in developing countries.

Target 18: In co-operation with the private sector, make available the benefits of new technologies, especially information and communications.


was the release of The DAC Guidelines: Poverty Reduction in 2001.10 These point out that the principles underpinning the Shaping the 21st Century vision – partnership, ownership, partner country leadership, broad-based participation, development effectiveness and accountability – have far-reaching implications for the way development agencies conduct business. Agencies have become accountable to partner countries as well as to their own publics for their actions and commitments. According to these guidelines, agencies now need to work in a closer and more co-ordinated way with a wider range of development partners and to act as facilitators, rather than prime movers, of development. Where the conditions for partnership exist, DAC members should also tailor their assistance to partner country priorities and needs. Doing this has been facilitated by the recent emergence in most low-income countries of Poverty Reduction Strategy Papers (PRSPs).

These documents, prepared by partner governments through participatory processes involving civil society and other development partners, have provided the basis of all World Bank and International Monetary Fund (IMF) concessional lending since 1999, as well as for debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative.

Other important work carried out within the DAC included the establishment in 2000 of a Task Force on Donor Practices. The aim of this group, which involved multilateral donors and selected developing countries as well, was to help strengthen partner-country ownership of development processes by identifying and documenting donor practices which could cost effectively reduce the burden on the capacities of partner countries to manage aid and lower the transaction costs involved. The Task Force’s work led to the release of a set of good practice papers.11 It also provided a major input into international efforts to promote harmonisation of donors’ operational policies, procedures and practices with those of partner country systems which culminated in the release of the Rome Declaration on Harmonisation,12 agreed at a High-level Forum in 2003. As a result of these processes, a common understanding has been reached on a set of principles in the domains of country ownership, donor harmonisation and alignment (see Box 1.2).

Box 1.2. Principles for country ownership, donor harmonisation and alignment

Work involving the DAC has helped foster general agreement within the development community on principles for donors in the domains of country ownership, donor harmonisation and alignment. According to these principles, development agencies should:

Rely on and support partner countries’ own priorities, objectives, and results. This implies alignment with the national strategy (a sound poverty reduction strategy or equivalent, with national linkage to the Millennium Development Goals as applicable) and use of reliable national systems and procedures (including the government’s budget, reporting cycle and monitoring timetable).

Co-ordinate with other development agencies under partner country leadership and promote joint action whenever possible (including through delegated co-operation – i.e.

one donor acting on behalf of another).

Strengthen partner countries’ own institutions, systems and capabilities to plan and implement projects and programmes, report on results and evaluate their development processes and outcomes, avoiding parallel donor-driven mechanisms.


Several ministerial meetings and major summits in recent years have also taken further forward the commitment to an outcome-focused and broad-ranging partnership to promote international development. The most significant of these was the International Conference on Financing for Development held in Monterrey in 2002.

At the United Nations International Conference on Financing for Development in Monterrey in 2002, developed and developing countries agreed on a compact for eradicating poverty, achieving sustained economic growth and promoting sustainable development. At this conference, a commitment was made to a new partnership between developed and developing countries so that internationally agreed development goals can be achieved, including the goals contained in the Millennium Declaration. In the Monterrey Consensus, countries committed themselves to pursuing sound policies, good governance at all levels and the rule of law. They also committed themselves to mobilising domestic resources, attracting international flows, promoting international trade as an engine for development, increasing international financial and technical co-operation for development, sustainable debt financing and external debt relief and enhancing the coherence and consistency of the international monetary, financial and trading systems.

The World Summit on Sustainable Development in Johannesburg in 2002 confirmed that significant progress had already been achieved towards a global consensus and partnership on a common path towards a world that respects and implements a vision of sustainable development. It noted that the ever-increasing gap between the developed and the developing worlds poses a major threat to global prosperity, security and stability. The Plan of Implementation agreed at the summit identified eradicating poverty as the greatest global challenge facing the world and an indispensable requirement for sustainable development, particularly for developing countries. It was consequently concluded that concerted and concrete measures were required by all concerned parties to enable developing countries to achieve their development goals.

The Fourth World Trade Organisation (WTO) Ministerial Conference in Doha in 2001 launched a new round of multilateral trade negotiations. Because of their focus on issues of importance for developing countries, such as improving market access for agricultural products, this round is known as the Doha Development Agenda. The main task of the WTO Fifth Ministerial Conference in Cancún in 2003 was to take stock of progress in negotiations and other work that was underway. This meeting resulted in an impasse but consultations continue with the objective of identifying opportunities for advancing negotiations further.

Significant momentum has been generated through the consensus reached by the Shaping the 21st Century report, the Millennium Declaration and the Monterrey Consensus on development priorities, resource needs and increased access to external financing. This momentum, combined with the HIPC Initiative and development of national Poverty Reduction Strategies, as well as the general agreement on the objectives and ideal approaches for providing foreign assistance, marks a turning point in the history of development co-operation and establishes solid foundations for moving forward.

However, there is no room for complacency since the development challenges that remain are substantial. Data assembled by the OECD show that for every goal and target included in the Millennium Declaration, there are encouraging signs of progress in some parts of the world as well as worrying evidence of stagnation and even reversal in others.13 The least-developed countries,14 particularly those in sub-Saharan Africa, are facing serious difficulties in their efforts to meet the Millennium Development Goals. It is critical,


therefore, that individually and collectively DAC member countries’ foreign assistance programmes are well managed, carefully targeted and complementary so as to enhance their effectiveness and improve impact.

Policy coherence for development

Important as foreign assistance is, in a highly integrated world there are many domains where the policies of donor governments can complement or frustrate development efforts in other countries. For example, domestic agricultural subsidies in industrialised countries can have trade-distorting effects, environmental and sanitary restrictions on imports can act as non-tariff barriers and immigration policies can result in developing countries losing health workers and other professionals who may have been trained through foreign assistance programmes. On the positive side, industrialised country policies can foster trade and investment and facilitate the sharing of technology. All of this highlights the importance of governments following through on their commitments to promote international development by taking the development dimension into account when formulating policies in a diverse range of areas.15 Otherwise, the impact of foreign assistance may simply be to offset the costs imposed on other countries by a lack of coherence in the policies of donor governments. Conscious of the implications for developed and developing countries alike of a more integrated world, Sweden recently adopted legislation that encourages a whole-of-government approach to promoting international development (see below).

An example: Sweden

The Swedish Parliament adopted legislation in December 2003 that makes contributing to equitable and sustainable development throughout the world a goal for all areas of Swedish policy. Shared responsibility: Sweden’s policy for global development (ref.: 2002/03:122) consequently lays a solid foundation for decision making that promotes international development. The legislation emphasises the importance of close collaboration with actors in all sectors of society including local authorities, civil society institutions, the private business sector and trade unions. Significantly, trade, agriculture, environment, security, migration and economic policy are included as examples of areas in which policies can and should promote global development. Development co-operation itself is included as one aspect of Sweden’s broader policy. It is expected that the new policy will result in some changes in the organisation and management of the Swedish development co-operation agency.

Experience across DAC member countries suggests that enhancing policy coherence for development16 can be a challenging process due to competing national interests.

Although full policy coherence for development may not be a feasible objective, it is critical that government decision making takes place with full awareness of the potential impact and implications of decisions on developing countries. Work within the DAC, building on more general work undertaken at the OECD,17 has highlighted some institutional approaches that can facilitate policy coherence, including:

High-level political commitment: A clear official statement on the global poverty reduction objective, reflecting a firm foundation for efforts by the government to ensure that developing countries’ concerns are taken into account in the formulation of policies.


Co-ordination mechanisms across government: Formal and informal inter-ministerial co-ordination processes at political and officials levels, allowing for a screening of policies and decisions vis-à-vis poverty reduction. It is important that development agencies themselves participate in these processes and are not represented by another agency or minister who may have a different perspective on issues.

Analytical capacity: Staff with the training, experience and time to assess broader policy issues in terms of their actual or potential effects on developing countries and poverty reduction. These staff may be housed in a dedicated policy coherence unit within the development agency (see below).

An example: the Netherlands

To help promote policy coherence for development, the Netherlands established in 2002 a small Policy Coherence Unit, headed at director level, within the Directorate-General for Development Co-operation of its Ministry of Foreign Affairs. The unit has two main functions: i)contributing to policy formulation in non-development areas and ii)tackling concrete cases of policy incoherence.

Because many non-aid policies impacting on developing countries fall within the purview of the European Union, the Unit engages actively in existing European Union co-ordination mechanisms within the Netherlands as well as works to build coalitions with like-minded European Union Member States. The Unit’s approach to tackling incoherence is more opportunistic, seizing windows of opportunity for change. For example, in 2002, the Unit took advantage of the mid- term review of the European Union’s Common Agricultural Policy and negotiations within the WTO on the Doha Development Agenda to prepare a report on improving coherence between agriculture, trade and development, particularly in relation to the three highly supported commodities of cotton, rice and sugar. The resulting Memorandum on Coherence between Agricultural and Development Policy was signed by both the Minister for Agriculture, Nature Management and Fisheries and the Minister for Development Co-operation, approved at cabinet level and sent to the Parliament.

From comparative DAC experience, some lessons can be highlighted related to enhancing policy coherence for development. The range of issues, actors and responses involved means that no single policy-making system can guarantee greater policy coherence in all contexts. Variable approaches should consequently be expected and, in their specific national context, may be just as effective in promoting policy coherence. Not surprisingly, the degree of policy coherence tends to diminish where a policy area is domestically sensitive and when there are strong domestic interest groups and government agencies with other primary interests involved. Sometimes, positive measures have been adopted but not necessarily in order to promote policy coherence for development. For example, the pressure to reform the European Union’s Common Agricultural Policy has mainly been promoted by net contributors to the programme, which raises the question of whether a lack of policy coherence for development provides sufficient grounds for changing policies. This demonstrates the usefulness of development agencies pursuing strategic alliances with other stakeholders so as to promote reforms that contribute to enhancing policy coherence for development.



1. World Bank (2003), World Development Indicators, World Bank, Washington DC. It should be noted that data are not published for all developing countries.

2. Princeton Survey Research Associates (2003), Global Poll: Multinational Survey of Opinion Leaders 2002.

Washington DC. The survey included 2 600 opinion leaders in 48 countries.

3. United Nations Population Division (2003), World Population Prospects: The 2002 Revision, New York.

Figures quoted are “Medium variant” projections.

4. In DAC terminology, “developing countries and territories” means those on Part I of the DAC List of Aid Recipients while “transition countries and territories” means those on Part II of the List (see Annex A.3 for further details).

5. In this report, the terms “development co-operation”, “foreign assistance” and “aid” are used interchangeably and refer to both official development assistance (ODA) and official aid.

6. McGillivray, M. (2003), Aid Effectiveness and Selectivity: Integrating Multiple Objectives into Aid Allocations, World Institute for Development Economics Research Discussion Paper No. 2003/71, Helsinki.

7. OECD (1996), Shaping the 21st Century: The Contribution of Development Co-operation, OECD, Paris, 8. Available at: www.oecd.org/dataoecd/23/35/2508761.pdf.

9. Available at: www.un.org/millennium/declaration/ares552e.pdf. The General Assembly has requested that the United Nations Secretary-General prepare an annual report on progress achieved by the United Nations system and member states towards implementing the Millennium Declaration.

This information is published on the Internet at: www.un.org/millenniumgoals/.

10. Available at: www.oecd.org/dataoecd/47/14/2672735.pdf.

11. OECD (2003), DAC Guidelines and Reference Series: Harmonising Donor Practices for Effective Aid Delivery, OECD, Paris. Available at www.oecd.org/dataoecd/0/48/20896122.pdf.

12. Available at www1.worldbank.org/harmonization/romehlf/Documents/RomeDeclaration.pdf.

13. OECD (2004), “Progress Towards the Millennium Development Goals”, The DAC Journal, Vol. 5, No. 1, OECD, Paris, pp. 51-70.

14. The term “least-developed countries” describes the world’s poorest countries according to a United Nations classification based on income, economic diversification, social development and population criteria.

15. Among other commitments, developed countries have set themselves the objective of assuring that the entire range of relevant policies are consistent with, and do not undermine, development objectives. OECD (1996), Shaping the 21st Century: The Contribution of Development Co-operation, OECD, Paris. See also: OECD Action for a Shared Development Agenda – Final Communiqué, Ministerial Meeting 2002.

16. It is useful to distinguish between policy consistency, i.e. ensuring that development co-operation policies are not internally contradictory, and policy coherence, which implies pursuing development objectives through mutually reinforcing aid and non-aid policies.

17. OECD (1996), Building Policy Coherence: Tools and Tensions, Public Management Occasional Papers, No. 12, OECD, Paris.


© OECD 2005

Chapter 2

The Legal and Political Foundations for Development Co-operation

Just over half of DAC member countries have passed legislation which establishes the basis for, and the main objectives of, their development co-operation programme and over two-thirds have developed policy statements which, while they do not carry the force of law, also set out the priorities and approaches of the development programme. Having a clear legal or policy basis for development co-operation, together with political representation at cabinet level, is critical if development objectives are to be regarded as a key component of government approaches in all major policy areas and if they are to take priority. Although public support for development co-operation is high within DAC member countries, understanding of development issues is fairly limited. Given the importance of the public contribution to development co-operation, improving public understanding may be critical if commitments to increase levels of development assistance and to promote greater policy coherence are to be met.


Legislative basis

To a large extent, the legislative basis for development co-operation programmes reflects the legal traditions of each DAC member country. It is striking that while 12 member countries (see Annex A.1), particularly those with codified legal systems (including Spain, see below), have extensive and detailed legislation to guide their foreign assistance programmes, other DAC member countries have no specific legislation at all, with overall policies and strategies being set by government and spending authority being obtained through appropriations legislation. In a few DAC member countries, general legislation sets the main lines of the development co-operation programme but then delegates to the government or the responsible minister authority to implement programmes within the limits defined. A well-developed legislative basis has the advantages of transparency and of clarifying responsibilities among the various government entities that may be involved, as well as establishing development objectives as the main thrust of development co-operation for the whole system. On the other hand, countries with a less formalised legal basis may have more flexibility to act and this could be an advantage when trying to build coalitions between development agencies and other government entities whose policies and actions have an impact on development prospects in developing countries.

An example: Spain

The Spanish Parliament passed a major new law in 1998 to up-date and consolidate the legislative basis for Spain’s development co-operation programme. Law 23/1998, dated 7 July, on International Co-operation in Matters of Development contains six chapters.

Chapter I defines Spanish policy on international co-operation in matters of development. Chapter II outlines planning, instruments and forms of Spanish policy on international co-operation. Chapter III establishes the institutions responsible for formulating and implementing Spanish policy on international co-operation. Chapter IV addresses resources issues, Chapter V personnel issues and Chapter VI participation by NGOs and other civil society partners. The law refers to the Spanish Agency for International Co-operation as the body to manage Spanish policy in this domain. That agency’s statutes – covering its role and responsibilities, aims and functions, management bodies, basic organisational structure, human resources policies and arrangements in respect of assets, economic and financial matters and labour contracts – were approved in Royal Decree 3432/2000, dated 15 December.

Political context

From a development perspective, the goals and targets of the Millennium Declaration have established medium-term objectives for foreign assistance at the international level.

However, achieving development objectives may be only one reason for providing foreign assistance. Many DAC members acknowledge that development co-operation is an integral


part of their foreign relations; some explicitly refer to development co-operation as an instrument for pursuing their national interests. The view of a former deputy administrator of the United States Agency for International Development (USAID) is that

“most governments also pursue other goals with their aid, including diplomatic, commercial and national cultural goals”.1 The Simons Committee’s report on Australia’s foreign assistance found that the aid programme had been “struggling to satisfy a triple mandate, emphasising foreign policy and commercial benefits to Australia as well as development benefits to developing countries”.2 The United Kingdom’s International Development Act 2002 made it unlawful to provide aid for purposes other than the reduction of poverty, such as the previous practice of promoting commercial interests by tying aid to the purchase of British goods and services.

Striking an appropriate balance between development objectives and other goals pursued through foreign assistance programmes is ultimately a political choice which each DAC member country makes. This choice is made, however, within the boundaries of the formal DAC definition of official development assistance (ODA), agreed to by all DAC members, that the main objective of ODA is the promotion of economic development and the welfare of the partner country. Additionally, sufficient weight needs to be given to development concerns because achieving development results and maintaining public support for aid require that foreign assistance does have an impact in terms of achieving development objectives. International initiatives are helping to restrict the possibility of using foreign assistance for non-development purposes. For example, the recommendation adopted by the DAC in 2001 to untie most categories of ODA to the least-developed countries3 has reduced opportunities for using foreign assistance to promote commercial interests.

General policy statements

Irrespective of the legislative basis, DAC member countries often find it useful to prepare an overarching general policy statement for their foreign assistance that outlines its main purpose and objectives. For example, 20 DAC member countries have an overriding policy objective guiding their development co-operation programme with poverty reduction featuring significantly in the overall objective for at least 16 members (see Annex A.1 for an outline of DAC member countries policy objectives and statements).

These policy statements may take the form of a government White Paper and should ideally be endorsed by all ministers responsible for activities that impact on development prospects in developing countries. Since such policies are often debated with or take account of inputs from civil society, the consultative process through which they are prepared may be as important as the document itself, if this helps to build public awareness of and support for the development co-operation programme. General policy statements can also provide a unity of purpose when a country has several agencies charged with implementing its foreign assistance, as is the case in Germany (see below).

Such policy statements may also contain information that does not lend itself to being set in legislation, for example ambitions regarding future levels of ODA as a share of gross national income (GNI). In some cases, policy statements relate exclusively to foreign assistance while others form part of broader government statements on international development, foreign relations or national security.


For example: Germany

The German government released in 2001 its Programme of Action 2015 for Poverty Reduction, which sets out the concrete steps the various German ministries and agencies will take to contribute to halving the proportion of the world population living in extreme poverty by 2015. The programme, produced with broad involvement of civil society and the private sector, situates poverty reduction as an important part of the government’s overall policy, as well as being the overarching goal of Germany’s development policy. The programme sets out 10 priority areas for action under which some 75 specific actions are listed. The 10 priority areas are: i)boosting economic activity and active participation of the poor, ii)giving effect to the right to food and implementing agrarian reform, iii)creating fair trade opportunities for developing countries, iv)reducing debt and financing development, v)providing basic social services and strengthening social protection, vi)ensuring access to essential resources and fostering an intact environment, vii)realising human rights and respecting core labour standards, viii)promoting gender equality, ix)strengthening good governance, and x)resolving conflicts peacefully and fostering human security and disarmament.

Ministerial arrangements

The national political environment plays a decisive role in explaining the number and variety of ministerial arrangements for development co-operation found in DAC member countries. Objectively, an ideal system would have clear leadership and most DAC member countries do have an identifiable political leader of their development agency. This may be a Minister of Development Co-operation or the Minister of Foreign Affairs with responsibilities that go beyond development co-operation to include foreign and sometimes trade relations as well. Nevertheless, the complex nature of development co-operation means that other ministers may also have responsibility for certain key aspects of their country’s development co-operation programme. For example, contributions to international financial institutions such as the World Bank may be the responsibility of the Treasurer or the Minister of Economy.

Humanitarian assistance may be implemented separately from the rest of the development co-operation programme and be under the responsibility of a different minister. In the final analysis, only a few DAC members have a single minister responsible for almost all aspects of their country’s foreign assistance programme.

As regards the seniority of the minister with main responsibility for development co-operation, in only a few DAC member countries is development co-operation the minister’s sole responsibility and this person sits in the cabinet of ministers (i.e. the inner circle of government). In many other cases, either the minister sits in cabinet but has a wide range of responsibilities or the minister is solely responsible for development co-operation but does not have a seat in cabinet. Neither of these situations are ideal from a development perspective. In the first case, the minister can defend development issues at the highest levels but cannot devote their full attention to development issues. In the second case, there is a risk that development issues may receive little attention at the highest level of government or that development issues are championed in cabinet by a more senior minister who otherwise has little contact with the development co-operation programme.

In countries where several ministers are involved in the development co-operation programme, it is important that some mechanism exists to co-ordinate activities and


promote synergies. In some cases, a formal co-ordination mechanism has been established (including France, see below). The membership, meeting schedule and mandates of such committees varies. Among the key factors that appear to influence the impact of these committees are the level of authority of the committee, its membership, the periodicity of formal and secretariat meetings, the mandate and the range of issues addressed.

An example: France

France established the Inter-Ministerial Committee for International Co-operation and Development (CICID) in 1998 with a role that includes promoting cross ministry co-ordination. It is presided over by the Prime Minister and its members include the Minister for Foreign Affairs, the Minister for Economic Affairs and Finance and the Minister for Co-operation, as well as other ministers who have responsibilities related to France’s development co-operation programme. The specific aims of CICID are to: i)designate the countries included in the Priority Zone for Partnerships (ZSP); ii)establish guidelines for the objectives and instruments of international co-operation and development assistance policy; iii)ensure coherence in the geographical and sectoral priorities for the different components of French co-operation; and iv)ensure the continuous monitoring and evaluation of aid relative to targets set. CICID normally meets at least once a year. In between these meetings, the committee may meet at official or senior official levels. The Ministry of Foreign Affairs and the Ministry of the Economy, Finance and Industry act as a co-secretariat for the committee.

Parliamentary oversight

Parliamentarians, as the elected representatives of the taxpayers who fund development co-operation programmes, are responsible for and can play an important role in monitoring the management and implementation of foreign assistance programmes.

Parliamentarians may become involved during plenary sessions of the parliament, such as during question time, or in meetings or hearings of parliamentary committees. In some DAC members such as the United Kingdom (see below), a specific committee or sub- committee has been established that focuses exclusively on international development and related issues.

An example: the United Kingdom

International development has been scrutinised by a committee or sub-committee of the United Kingdom Parliament since 1967, sometimes as part of a broader mandate to monitor foreign policy issues. The creation of the Department for International Development in 1997 triggered the establishment of the current International Development Committee with the role of examining the department’s expenditure, policy and administration. Since then, the 11 person committee has prepared reports and called for evidence on a variety of subjects, including most recently: strategic export control; migration and development; and development assistance and the occupied Palestinian territories. The committee may take evidence from whomever it pleases in government or from civil society.

The government may publish responses to the reports issued by the committee.

The United Kingdom Parliament also has a long-standing informal All-Party Parliamentary Group on Overseas Development, a 20-member group that aims to


keep abreast of all matters concerning international development, notably in its economic, social, political and humanitarian dimensions.

Parliaments are quite active in some DAC member countries and a considerable time may be spent by ministers and civil servants in responding to their requests for information or briefings. In these countries, parliamentarians’ participation may extend to an active involvement in setting overall policies and taking major decisions. However, in many other countries, the role of the parliament is comparatively modest. The existence of a specific committee dealing with development issues or a unified budget that covers most foreign assistance expenditure appear to be two important factors influencing the level of parliamentary involvement in development co-operation.

Public support for development co-operation

The public in DAC member countries are key stakeholders in foreign assistance programmes. Not only do they contribute to these programmes through their taxes and by electing the politicians who monitor aid policies, management and implementation, they also stand to benefit from the increased prosperity and security that will flow from greater economic growth and less poverty in developing and transition countries. At the same time, in many DAC member countries, the public’s understanding of development issues is fairly shallow and support for foreign assistance, though strong, is based upon the erroneous assumption that it will mostly be spent on humanitarian crises. People also tend to overestimate considerably their government’s aid effort.4 As with other major public policy areas, the public have a right to be aware of, and to understand better, issues related to international development and foreign assistance. Some DAC member countries see this as being of critical importance. In Switzerland, for example, the Federal Law on International Development Co-operation and Humanitarian Aid obliges the government to provide public education on development issues. Other DAC member governments do not consider it to be their role to educate the public, or preclude their development agencies from doing this by law.

Development education

Improving awareness and understanding of development issues is important because it enables the public to engage better in debates on development policy, helps to build support for foreign assistance programmes and can promote policy reforms and improvements. The public in DAC member countries appear predisposed to learning more about development issues because their support for helping developing countries has remained consistently high for almost two decades. Better educated, young and urban- dwelling individuals tend to be stronger supporters, a finding that could be instructive for targeting awareness raising activities.5

Improving public understanding will be particularly important for achieving the Millennium Development Goals. These call for increased volumes of aid and greater development coherence in policies in donor governments, objectives which may require strong political will and sustained political support if difficult political trade offs are to be made that favour international development. With greater understanding of issues, the public, and their elected representatives, should become more convinced that difficult political choices may be necessary but that these are justified by the longer-term benefits that will accrue.

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